Editorial: Prepare for the Legislature’s taxing superpowers

If you don’t like taxes, Wednesday was a rough morning in Oregon. Final results are still out, but Democrats now apparently hold a supermajority in the Legislature.

All those tax bills thwarted in the past by Republicans? Democratic supermajorities could even now have an eye on your wallet.

Oregon Democrats used to have to pretend that massive tax hikes, such as a proposed annual $700 million state carbon tax, weren’t taxes at all. That enabled them to slouch past the state constitutional requirement for a supermajority.

In an outrageous bit of trickery, legislators insisted the new carbon taxes were not taxes because — they wrote that they were not in the bill. Now they won’t even have to pretend.

Plans for a $1 billion or more gross receipts tax will surely come back off the shelves. Democrats put plans for such a tax on hold after the failure of Measure 97, waiting for the outcome of the 2018 election. With a supermajority, expect it to be back.

In the Democratic Temple of Taxation, gross receipts taxes are among the holiest of holies. They tax business sales, usually don’t allow deductions and businesses basically have to pay no matter what — even if they are not making a profit.

But they have serious flaws. Why tax a business that isn’t managing to make a profit? Do Democrats really want to encourage more businesses to fail?

Gross receipts taxes also tax all transactions between businesses, including when businesses buy supplies and equipment to build their products. That means that gross receipts taxes pyramid. Businesses end up paying taxes on taxes on taxes.

We know Oregonians don’t like sales taxes, but they are much fairer than charging taxes on taxes on taxes. And as the Oregon Legislative Revenue Office pointed out, tax pyramiding almost inevitably means higher prices for consumers.

The Legislature has also considered in the past bills that would cut mortgage interest deductions for homeowners. More than half a million Oregonians could lose that tax break for their state taxes. With the Legislature loaded with Democrats, start saying your goodbyes now to that deduction.

The only solace is that in Oregon voters still hold a check on the power of the Legislature to tax with or without a supermajority.

Taxes can be challenged at the ballot box — except of course, Democrats may resort to their old trick of insisting taxes are really not taxes at all.